Cabinet was provided with an interim report on the Council’s treasury management operations for the period 1 April, 2015 to 31 December, 2015 and to submit for consideration the proposed 2016/17 Treasury Management and Annual Investment Strategy.

The Welsh Government (WG) provided the Council with a General Capital Funding grant and the Authority was also advised of a level of borrowing that WG was prepared to fund via the Revenue Support Grant Settlement. If the Council wished to borrow in excess of this level to increase its capital expenditure, then it could. However, it would either have to find the additional costs of borrowing through savings in other services or increases in council tax.

In order to manage this increased flexibility, Part 1 of the Local Government Act 2003 required local authorities to have regard to the Prudential Code, which had been developed by the Chartered Institute of Public Finance and Accountancy (CIPFA) as a professional code of practice.

The key objectives of the fully revised Prudential Code are to ensure that the capital investment plans of local authorities:

are affordable;

all external borrowing and other long term liabilities are within prudent and sustainable levels;

The treasury management decisions are taken in accordance with professional good practice.

In March 2012 the Council adopted the CIPFA Treasury Management in the Public Services: Code of Practice 2011 Edition (the CIPFA Code), which requires the Council to approve a treasury management strategy before the start of each financial year.

The Code of Practice and legislation requires the Council to set out its Treasury Management Strategy and to prepare an Investment Strategy. The Welsh Government (WG) issued revised Guidance on Local Authority Investments in April 2010 that requires the Council to approve an investment strategy before the start of each financial year and states that authorities may produce a single strategy document, covering both the requirements of the CIPFA Treasury Management Code and WG's guidance.

The proposed Treasury Management and Investment Strategy for 2016/17, was attached at Appendix 1 to the report. The Treasury Management Strategy itself covered a rolling period of three years and was intended to link in to the Medium Term Financial Planning process. The Investment Strategy covered the next financial year. The document also included a number of statutory Prudential Indicators that may be used to support and record local decision-making.

The Interim Report and Treasury Management and Investment Strategy for 2016/17 was reviewed by Corporate Resources Scrutiny on 9 February, 2016 and the report was endorsed by the Committee. The Interim Report and Treasury Management and Investment Strategy for 2016/17 was also due to be reported to Audit Committee on 22 February, 2016 and any comments would need to be referred directly to Council.

Proposed Strategy 2016/17

As at 31 December, 2015 the Authority had placed all of its investments with either the 'Debt Management Account Deposit Facility' (DMADF) of the Bank of England which were guaranteed by the UK Government or placed with UK Local Authorities.

The Authority would continue to use credit ratings from the three main rating agencies Fitch Ratings Ltd, Moody’s Investors Service and Standard & Poor’s to assess the risk of loss of investments. The lowest available credit rating would be used to determine credit quality. In addition regard would be given to other available information on the credit quality of banks and building societies.

Interim Report

In so far as the Council’s treasury management operations entered into for the period 1 April, 2015 to 31 December, 2015 are concerned, all activities were in accordance with the Council’s approved strategy on Treasury Management. The following table sets out the monies borrowed / repaid during the period.

Loan Type

Opening Balance

Received

Repaid

Closing Balance

01/04/2015

31/12/2015

£’000

£’000

£’000

£’000

PWLB

90,266

63,156

(812)

152,610

Other Long Term Loans

6,002

0

(2)

6,000

Temporary Loans

100

760

(760)

100

Total

96,368

63,916

(1,574)

158,710

Loans borrowed from their Public Works Loan Board (PWLB) were intended to assist Local Authorities in meeting their longer term borrowing requirements. The above loans were all at fixed rates of interest. The rate paid on each loan was largely dependent upon the original duration of the loan and date taken out.

Other long term loans represented those non-PWLB loans that were repayable at least one year or more from the date they were advanced. The bulk of this debt was represented by two market loans of £2,000,000 and £4,000,000. The balance of this debt was local bonds which expired during the period.

Temporary loans represented those loans that were borrowed for a period of less than one year, borrowed on notice.

The Council’s investments for the period to 3 December, 2015 is set out below;

Borrowing Institution

Opening Balance

Invested

Returned

Closing Balance

01/04/2015

£’000

£’000

31/12/2015

Local Authorities

30,000

74,000

(54,000)

50,000

Debt Management Account Deposit Facility

51,125

1,155,130

(1,166,005)

40,250

Totals

81,125

1,229,130

(1,220,005)

90,250

Interest, at an average rate of 0.33% and amounting to £201,399 had been received from maturing investments for the first 9 months of 2015/2016.

After presenting this item, the Leader made an amendment to Appendix 1 of the report. In the first table on page 4 of the Appendix, the 2016/17 estimate in the HRA column should read 28.30 and not 228.30.

This was a matter for Council decision

Cabinet, having considered the report and all the issues and implications contained therein

RESOLVED –

That Cabinet recommends to Council the following;

(1) T H A T the Treasury Management interim report for the period 1 April to 31 December, 2015 be endorsed and referred to Council for approval.

(2) T H A T the proposed 2015/16 Treasury Management and Investment Strategy attached at Appendix 1 to the report beendorsed and referred to Council for approval including the following specific resolutions:

• The Authorised Limit for External Debt be set at £229,000,000 for 2015/16, £248,000,000 for 2016/17, £254,000,000 for 2017/18 and £255,000,000 for 2018/19.

• The Operational Boundary for External Debt be set at £210,000,000 for 2015/16, £228,000,000 for 2016/17, £228,000,000 for 2017/18 and £228,000,000 for 2018/19.

• The Section 151 Officer be granted delegated authority within the total Authorised Limit and Operational Boundary as estimated for individual years to effect movement between the separately agreed limits for borrowing and other long term liabilities.

• An upper limit be set on its fixed interest rate exposures of for 2016/17 of £219,000,000, for 2017/18 of £223,000,000 and for 2018/19 of £223,000,000 of its net outstanding principal sum on its borrowings / investments.

• An upper limit be set on its variable interest rate exposures of £0 for 2015/16, 2016/17, 2017/18 and 2018/19 of its net outstanding principal sum on its investments.

• An upper limit of £15,000,000 be set for total principal sums invested for over 364 days for 2015/16, 2016/17, 2017/18 and 2018/19.

• The amount of projected borrowing that is fixed rate maturing in each period as a percentage of total projected borrowing that is fixed rate for 2016/17 be set as below:

Upper Limit

Lower Limit

Under 12 months

20%

0%

12 months and within 24 months

20%

0%

24 months and within 5 years

30%

0%

5 years and within 10 years

40%

0%

10 years and above

100%

0%

• The Prudential Indicators set out in Appendix 1 attached to the report be approved.

• The Treasury Management Policy set out in Appendix 2 attached to the report be endorsed.

Reasons for decisions

(1) To present the Treasury Management Interim Report.

(2) To prepare the Treasury Management and Annual Investment Strategy as required by the Local Government Act 2003.

N.B. Scrutiny Committee (Corporate Resources on 9th February 2016 had recommended that the Treasury Management interim report for the period 1st April to 31st December, 2015, together with the draft resolutions to Council on 2nd March 2016, be endorsed. Audit Committee on 24th February 2016 resolved that the comments of the Scrutiny Committee be endorsed.